While there are fair few corporate results still to come next week in the latest earnings season, the stockmarket appears to have already given its verdict.
Friday's 21-point rise in both major indices - the ASX 200 and All Ordinaries - capped off a good week for the bourse. The ASX 200 rose 2.6 per cent since Monday - a creditable performance after the bumpy ride since the start of the year.
It was also the biggest five-day rise since early December, when retailers were downplaying any growth in sales before the Christmas trading period because of the continuing consumer spending strike and Greece's debt crisis was playing havoc with the international markets.
Those factors continue to affect investor sentiment but a slew of reasonable company profit figures, buttressed by good dividend payments, have helped offset some of that negativity. So much so that the ASX 200 managed to break through the 4300 barrier again - a feat not achieved for 12 weeks.
The industrial and energy sectors led the way with strong earnings growth, according to the latest research of profit season by Citi's equity research team.
They were followed by telecoms, healthcare and consumer staples with financials and property bringing up the rear before the results performance is dragged down by negative contributions from the materials, IT and utilities sectors.
Across the top 200 companies, Citi is pricing in aggregate earnings growth of just 11 per cent for 2012 - down from 17.7 per cent last year and a far cry from the 29.6 per cent achieved in 2010.
The ASX 200 is now priced on an earnings multiple of 11 times, which may explain why investors are prepared to dip into the market and pick up some of the cheaper stocks.
As far as consumer sentiment is concerned, first-half results from Woolworths, the country's biggest retailer, and Harvey Norman will give a real sense of whether the early signs of a pick-up in spending - as detected by the retailer David Jones - is also more than just a blip.
In the meantime, the market will continue to be affected by events overseas, in particular the euro debt crisis, where the latest Greek bailout is by no means certain to succeed, and by a nascent US recovery that is more likely to drive our stocks upwards.
A positive performance from Wall Street was one of the factors that helped lift the local market yesterday and saw the ASX 200 finish 20.6 points higher, or 0.48 per cent, at 4306.8 points. The All Ordinaries added 21.5 points to 4389.
A CommSec analyst, Juliette Saly, said it was encouraging to see the market gain strength towards the close of the trading session.
European markets were subdued overnight, but US markets gained ground after jobless claims data signalled that the American labour market was getting back on its feet
NAB was the strongest performer of the big four banks, rising 31?, or 1.34 per cent, to $23.52. ANZ was up 13? at $22.20, Westpac rose 12? to $20.78 and Commonwealth Bank rose 18? to $49.70.
Mining giant BHP Billiton rose 31? to $36.54, while Rio Tinto gained 58? to $68.09.
Ms Saly said the retail sector performed well, with David Jones gaining 10?, or 3.92 per cent, to $2.65, while Kathmandu rose 4.5?, or 3 per cent, to $1.53.
Virgin Australia continued to rise in the wake of the airline's strong earnings report on Thursday.
Virgin finished up 1.5?, or 3.8 per cent, at 41?.
The spot price of gold finished at $US1780.20 per ounce, up $US6.80.
Frequently Asked Questions about this Article…
How did the ASX 200 perform this week and what were the key index moves?
The ASX 200 had a good week, rising about 2.6% since Monday and recording its biggest five-day gain since early December. The index broke back through the 4,300 level and finished the session 20.6 points higher (0.48%) at 4,306.8. The All Ordinaries also rose, adding 21.5 points to finish at 4,389.
Which sectors led earnings growth during this profit season?
According to Citi’s equity research, the industrial and energy sectors led the way with strong earnings growth. They were followed by telecoms, healthcare and consumer staples. Financials and property lagged the leaders, while materials, IT and utilities were producing negative contributions to results.
What is Citi forecasting for aggregate earnings growth in 2012 and what does that mean for ASX 200 valuations?
Citi is pricing in aggregate earnings growth of about 11% for 2012 (down from 17.7% last year). The ASX 200 is trading on an earnings multiple of roughly 11 times, which helps explain why some investors are willing to dip into the market and buy cheaper-looking stocks.
How did the big four banks and major miners perform in the recent trading session?
The big four banks all rose on the day. NAB was the strongest performer and closed at $23.52; ANZ, Westpac and Commonwealth Bank also finished higher at $22.20, $20.78 and $49.70 respectively. Mining giants BHP Billiton and Rio Tinto also advanced, finishing at $36.54 and $68.09.
Are retail results influencing consumer sentiment and which retailers should investors watch?
Yes — first-half results from big retailers will be watched closely for signs of a pick-up in spending. Woolworths and Harvey Norman were flagged as important upcoming reports, while David Jones has already signalled some improvement (its shares rose to $2.65) and Kathmandu also gained, closing at $1.53.
What overseas events are affecting the Australian market right now?
The market remains sensitive to overseas developments, notably the euro debt crisis and uncertainty over the latest Greek bailout. At the same time, signs of a nascent US recovery — including improving US jobless claims — and a positive Wall Street session helped lift local stocks.
Why did investors feel more positive despite ongoing global risks?
A slew of reasonable company profit results, supported by good dividend payments, helped offset negative sentiment from global risks. That combination encouraged buying, particularly into sectors and stocks seen as relatively cheaper given current valuations.
What happened to the gold price in the latest session?
The spot price of gold finished at US$1,780.20 per ounce, up US$6.80 on the session.
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